Around midnight on September 14, the Ministry of Natural Resources issued a release headed `Statement on audit of ExxonMobil expenses’ in which it said that the Minister of Natural Resources, Vickram Bharrat had endorsed the position outlined earlier in the day by Vice President Bharrat Jagdeo that the Guy-ana Revenue Authority (GRA) is the “competent authority” to lead all audits for expenses incurred by ExxonMobil Guyana and its partners.
The release added that like Mr Jagdeo, Minister Bharrat stood by the GRA’s no-objection to the US$214m in disputed expenses which were flagged by UK firm IHS Markit in its auditing of ExxonMobil’s US$1.7b in expenses for the period 1999 to 2017.
It was further stated in the release that the Ministry’s Petroleum Unit which was assisting in the audit process “had engaged in an unauthorized examination of documents submitted by Exxon”. It added that both Messrs Jagdeo and Bharrat were “under the impression that the information submitted to them on subsequent reductions (of the US$214m figure) emanated from the GRA which is not the case”.
The release said that Minister Bharrat wished to state “emphatically that upon learning of this development. Corrective action was taken immediately and staff was instructed to cease such engagements and deliberations”.
In essence, under the supposed watchful eyes of Minister Bharrat, the ministry’s Petroleum Unit had engaged in improper exchanges with ExxonMobil which, according to some reports, slashed the disputed figure of US$214m to US$3m. It would be important to know who initiated these discussions and exactly how they led to a reduction in the disputed figure. Wasn’t the very keen ExxonMobil unaware it was engaged in an unauthorised practice?
Upon the discovery of this chain of events, the head of the Petroleum Unit should have been immediately dismissed and Minister Bharrat should have offered his resignation to the President. Those things do not appear to have happened and their absence will only mark Guyana further down on the indices of accountability and the perception of corruption. It would be quite easy for a liability of US$214m to be magically cut to US$3m using unorthodox means. Nothing has so far been heard from President Ali on this scandal but it is another example of poor governance in his administration and it is about time that he asserts his authority in defence of clean governance.
The shenanigans that contaminated the examination of the US$214m in disputed expenses fit neatly with a pattern of behaviour by this government to protect the interests of ExxonMobil and partners over those of the Guyanese public. The IHS Markit audit had been commissioned in 2019 under the former APNU+AFC government. It was meant to provide the first detailed insight into whether ExxonMobil and partners were making improper claims under the rubric of cost oil which accounts for up to 75% of all oil production each year. Were Exxon and partners to be making insupportable claims it would mean that a portion of that cost oil was being improperly tapped and profit diverted from Guyana.
There should therefore have been great urgency by the PPP/C government in examining the final auditor’s report and bringing ExxonMobil to heel over the excesses and the absence of supporting paperwork and there was plenty of this in the IHS Markit final report.
Among the major findings in the audit report was that 12.8% of the US$1.67b expenses claimed by ExxonMobil and its partners could be disputed by the Guyana Government. This US$214.4m was roughly one fifth of the amount injected into this year’s budget from oil and gas revenues.
“The Audit has established that GoG has reasonable grounds to dispute US$214.4 million plus overhead adjustments of the costs currently included by EEPGL in the Cost Bank. This amount represents 12.8% of the cumulative cost recovery balance as of Q4 2017 Statement,” the IHS Markit Final Audit Report said.
The disputed costs fell into three main categories – Defined Costs for Removal (DCR), Inadequate Supporting Documentation (ISD), and Ministerial Approval Required (MAR). For each of the categories, the sums were: DCR – US$34 million, ISP – $179.8 million, and MAR – US$0.27 million.
The final report of IHS Markit was submitted to the PPP/C government in March of 2021 but its findings remained hidden from the public and all sorts of hollow excuses were offered by senior government officials. It wasn’t until April 2nd this year when Stabroek News published the findings that the public became aware of them and pressure rose on the government to act. Even then, all sorts of defences were thrown up for not having concluded the process. A final audit report requiring action by the government to preserve the country’s revenues was not cleared for nearly two years and were it not for this newspaper it may have still been hidden from public view up to this day.
The underhanded behaviour did not end there. At some point this year, based on the ministry’s midnight release, unauthorised efforts with ExxonMobil were ongoing and it was not until another Stabroek News story on September 4th, 2023 reporting the GRA as offering no objection to the $214m figure and advising that the audit be finalised that these stealthy attempts to cut the disputed figure were interdicted. ExxonMobil must now offer an explanation to the public for its conduct or face the accusation that it was complicit in an illegality.
This is just a microcosm of the shocking handling of the oil and gas sector by this government and in this case, as a result of reports in this newspaper, it has been forced to take rectifying measures.
There is of course another figure in these unsavoury proceedings – Vice President Jagdeo who had spoken volubly about the disputed amount being cut drastically to US$11m. He sought to absolve himself of any responsibility by stating that he was of the view that the GRA had been involved in the examination of the US$214m figure.
“I had this engagement again with the Ministry, and let me say, this matter should have been closed earlier. So, I thought that GRA was dealing with this matter, totally, because that is what we said, that the GRA should deal with the matter of audit. They should have a final say at the technical level. I was reluctant to even speak about it because I said it was being handled technically,” Mr Jagdeo said at a press conference on Thursday.
“So, what happened? I discovered that the GRA wrote the ministry, twice to say, we were not part of this audit so we can’t comment too much on the US$214 million and then finally they wrote back saying that , notwithstanding, given the passage of time, that was in August of this year, let us close this at US$214 million,” he added.
Mr Jagdeo lamented that the ministry disregarded the letter and entered into its own discussions with the oil major.
This incident brings to the fore Mr Jagdeo’s penchant for speaking in believed authoritativeness on any and every thing under the PPP/C government’s sun. Circumspection should be his watchword. As someone engaged in oil and gas policy it is apparent that Mr Jagdeo could not be involved in the business of the ministry as it pertained to closing this benighted audit and therefore should have exercised caution in his utterances.
Two matters have now been brought into sharper relief. Guyana’s profit margin has to be supplemented by US$107m as a result of the IHS Markit audit. Who is overseeing this and how will it be accomplished? Second, an even more important audit, one by the RHVE Consortium of US$7.3b in post-contract costs is meant to be wrapping up among the various parties. Can the public expect that this process will be soon concluded and the requisite measures, if necessary, taken in defence of Guyana’s revenues?
